 Hello and welcome to NewsClick. The second phase of the Bihar elections is scheduled to be held on November 3rd. Now these elections are important not only for the state of Bihar but also for the country, a lot of key issues at stake. And one of the key aspects of Chief Minister Nitish Kumar's campaign has been his claim of good governance. He said that over the past 15 years he's brought about a lot of economic change to the state, brought about a lot of administrative change to the state. But how much of this has really happened? To talk more about this, we have with this Praveenja, Professor of Economics at Jahlal Air University. Thank you so much for joining us. Thank you. Yes, so my first question was regarding a very curious phenomenon as far as Bihar's finances are concerned. Now, it looks like Bihar actually has a revenue surplus and when the states are talking about having no money for development, no money to spend. But how does a state like Bihar actually end up with a revenue surplus and what does it indicate about the government spending? Two things. Firstly, you have to contextualize it and situate it in the larger trajectory of center state finances and in particular the neoliberal turn which was manifested largely through FRBM Act, which then tied whatever states get from center by keeping their fiscal deficits, in particular revenue deficit. The idea was to do away with revenue deficit and fiscal deficit could have been in the range of around 3 percent or so. So that was the larger sort of context and it is basically around 2000 or so that this thinking got into action 3, 4 was the period when it gets implemented. So basically from 4, 5 onwards, you will notice that a large number of very poor states in India, they get into this business of revenue surplus, whether it is Orissa, Bihar, whichever state you are looking at, the so-called Bimaru states, it is a phenomena which is there and it seems a bit odd, a bit bizarre, somewhat as you said curious and so on. But it is fully understandable, now there are only two ways that you will have revenue surplus, one you actually raise more resources. Now clearly that is not happening on any significant scale, in case of Bihar in particular, in fact the larger part of what Bihar gets as resources or gets in its resource kitty as resources comes from the center. So the state in any case does not have too many things from which it can raise resources, the share of direct taxes is very small and so on in case of Bihar. So you essentially then think of ways by which you curtail the expenditure. So essentially that has been happening. If you look at the long-term trend for about roughly fifteen, sixteen years, in almost each one of these states, which then basically means very key areas which should receive attention as part of the development trajectory, get neglected and in particular social sector I mean I will give you one example for instance. If you look at the situation in Bihar with respect to let us say what is supposed to be requirement at the health centers, primary health center, local hospitals and so on and so forth. Community health center, the required number of specialists is supposed to be four. Now that in itself may be on the lower side because the number of health centers that you have is not adequate and the reaches if anything has worsened over the years. But if we take this as the state's stated requirement then as per the most recent estimate from the official stats, the position occupied is 121, vacancy is 483. Now you know it is obviously a grotesque kind of situation and I am giving you only one example relating to the health sector. We can get into the nitty-gritty of it, we can get into education and so on. We can look at the requirements that we have of trained teachers, etc. So if you look at the overall priorities of the state government, somewhere it is to keep your expenses in a functional state by addressing the most urgent needs. What are the most urgent needs then? Salaries. I mean you can't run a government without doing that and that too is of a nature where there are lots of questions being asked. So for instance if you look at the workers on the ground, the most critical workers you know Anganwadi workers, your Asha's and so on or look at teachers what has been done in case of Bihar is basically you have the overwhelming cadre of para-teachers. So through that also you compress the overall expenditure. So basically this has been the situation over the last almost three decades, has different phases and so on. In case of Bihar, 2004-5 onwards I mean it was already you know in 4-5 the revenue surplus was 1076 crores and in the last fiscal it was 19173 crores. What happens in case of Bihar and most people probably do not pay adequate attention to it is that there was a massive expansion for about roughly 10 years of resources through alcohol. So there was a very, very indiscriminate spread of outlets, most of these so called tekhas, villages etc and then it became a huge problem. So village after village started complaining and so on. So earlier with respect to alcohol you had a more careful strategy you know you did not have this kind of indiscriminate expansion etc. What happens then you decide to have a basically 180 degrees, you go to the other extreme what has happened on the ground essentially the state has been criminalized. So it is not the case that alcohol is not available easily in Bihar you know as it happened in Gujarat earlier the other prohibition states and so on. So it is why it spread availability which is of course a cause of concern but equally importantly use of Bihar they find that a very, very easy option to get into because there is no employment. So it is a kind of employment which the state effectively has put in the category of criminalized employment. So you have to look at this particular aspect how Bihar's resources grew and it did grow for a while you know its own resources and so on up to 15, 16 or so. But after that I mean if you again look at some numbers as regards own resources you know last 4 years or so the situation has been pretty grim. So that is the kind of context which we need to keep in mind but I took some time explaining this simple answer is that the claims are highly exaggerated of addressing issues of development and doing various things and so on. Bihar continues to have the lowest per capita income amongst all Indian states yes indeed if growth figures have to be believed and I have had serious reservations about growth figures not only for Bihar but almost in India last 5, 6 years in particular. But during the decade of 2010 we did not have enough information to calculate growth rate of agriculture right. You know for a while you did not have the requisite information in economic survey. If that is the case then of course we can sort of be excused for being more cynical for Bihar's growth figures. But even if you take those growth figures as they are and they have been higher than average all India and one of the you know higher GDP state GDP growth rates and so on. Yet as we mentioned before we are talking of the lowest per capita income right. If you look at various indicators you know whether it has to do with health, education, employment, unemployment the last data that we had from PLFS you know which showed that India had the highest unemployment rate in its 45 years for which we had the comparable data right and in that Bihar's share Bihar's percentage was higher than the national average. So clearly if growth is happening why is it not translating into certain kinds of options which will generate livelihoods, employment and so on right. So basically my sense is that to the extent that this spending or the expenditure has to happen these happen on areas which are very critical areas. For instance you have to repay your loans I mean you cannot get away from that you have to pay salaries and so on forth right. Real good quality expenditure for expansion of the economy that unfortunately is not happening so there is no puzzle you know there is no curiosity why is it that so partly it is driven by the center what the center insists and so on and partly it is a kind of choice that a poor state has to make. So in this context I just will come to the COVID aspect as well but I wanted to ask one more question regarding the state's overall debt and one of the figures that has come out in recent times is that there's been a huge increase in the amount of debt it's sustained. Now one would understand it if it's for instance a state which is in say peak economic development there's a lot of industrial growth there's a lot of investment happening but given the circumstances you described in Bihar that doesn't look to be happening either. So how has it accumulated this massive increase in debt as well. You see this debt is to a large extent because of expenses that you cannot avoid yeah and it's basically for running of the system so to say that the state has indeed got into this situation on the other hand to be fair to the what was very popularly known as Sushasan Babu's regime they have been certain areas for instance capital expenditure if you look at that there was some increase there was some increase in rural development roads electricity and so on. So part of it is explained by that yeah but given that it's basis of resource mobilization is so limited you can't do it any other way no it has to it has to rely to a large extent on that yeah and the options for borrowing also for state governments tend to be limited. So you know sort of what happened earlier for instance till I think 2007 a to so you had certain kinds of options which will happen to be there that changed subsequently all this has obviously cost implications yeah so then that keeps getting added to your debt right. So if you are raising debt at higher cost and so on. So we need to explore all these issues so as of now if you look at the debt situation it is 2,00,000 crores and if you are looking only at public debt that is 1,65,000 crores in the current financial year it has increased since 2005-6 by 500 times yeah and if you look at between 2010-11 the increase is 300 times. So where this borrowed money has been put as you asked I have been asking the same question as I said part of it I can see part of it is invisible is not quite clear you know what kind of priorities the state set up for itself if it was very carefully spent on social sector expenditures and the necessary infrastructure physical infrastructure we would have seen in fact very decent kind of returns also right but why is it that we are not seeing that clearly the answer lies in the fact that the way it was spent in ways which possibly were not productive which should not have been prioritized and so on right absolutely and this context you had mentioned the policies of the center now one of the major claims of Narendra Modi in his campaign has been that there has been a double engine the governments of the state and the center have been in perfect sync and that is the reason for all this development. So over the past few years what has been the state of Bihar with respect to the union government you see it is indeed the case that barring 18 months or so when JDU decided to be part of the so-called grand alliance and was with RGD Congress and so on if you take that out it has had a good equation with the the center yeah earlier also with the NDA 1 and then subsequently NDA 2 and NDA 3 Modi 1 and Modi 2 right so that of course has helped things a bit but not very much you know for a variety of reasons Bihar has not been prioritized by the union government right go back to the election promises of 2015 none of it was full filled right from the overall resource envelope that was talked about two small things now it is amazing that in 2015 you talk of medical college in Darbhanga in 2020 you talk of a medical college in Darbhanga right so it is partly because of certain kind of I would say uneasy equation that Nitesh Kumar may have had with the the center to in center scheme of things it doesn't figure right to the same extent that let's say Uttar Pradesh figures of course Gujarat figures and so on so that is the primary reason why we have this kind of situation so you know there was a demand of you know this special category state and the requirement which would go a long way why is that not being honored you know I mean assurance is given right it was never agreed but assurance yes election time of course you can expect that all kinds of assurances are given but post election you know you have had occasions when it has been said that it would be considered seriously and so on but no special package right so I would say that in general this relationship between Bihar and the center has not been at the same level in terms of comfort in terms of synergy and so on in terms of give and take which some other states have had basically BJP ruled states in the last six years so that's part of the story the other factor you know since you talked of the synergy and so on forth it is indeed the case that there is lot of rhetoric about cooperative federalism but on ground it is anything but cooperative federalism in fact if you look at the economic processes on the ground basically it's a kind of what you can call competitive federalism right so it's like a race to the bottom and each state trying to sort of do many things labor laws are a very good example and the way that kind of drags down a very large section of the population in each state so it's like a race to the bottom and so on in fact the phrase which I would prefer for this is predatory federalism I don't even want to call it competitive federalism because the union government the center unleashes forces and that has been the hallmark of the current prime minister if you look at his policies etc right so at the level of rhetoric you know you can talk of anything and everything but the processes which have been put in motion once you start analyzing them you find that we are in a deep hole yeah and that has been the reason how things got messed up right and that is where I mean you have to for instance look at demonetization was any state government taken into confidence right okay you might say that since this was supposed to be a shock and all thing and the state governments could not have been taken into account etc think of lockdown yeah it was a huge sort of decision which the states had to implement you know and states not only had to implement but they also had to be responsible for a whole range of policies that are required to try and ease the pain of this lockdown you leave all that to the states without taking them into confidence if you think of GST and the way it has been implemented and you know states have been crying horse we see what was happening in the last roughly 7-8 months yeah the payments which were due for the previous year right that were paid only after April so this whole sort of talk of cooperative federalism and synergy between certain states to my mind is completely misplaced and finally professor one last question so we talked about the government and its various failings now the opposition has a very ambitious agenda they are promising a huge number of jobs they are promising of course and a completely new model of development how are they what are the possibilities for financing this if they do come to power for a state like Bihar which is very limited in terms of mobilization of resources the challenges will continue to be huge because the architecture of resource mobilization in the country has changed for the worse and there as I said GST played a terrible role right in fact the 10th finance commission had brought many areas in terms of you know raising resources etc within the ambit of state governments what happened yeah with GST was a real retrogression right so we need to keep that in mind okay so broadly you sort of are very constrained very challenged right but you know if we look at the choices which the state government has any state government of course one is that you say listen FRBM is something which is hurting us quite a lot so what has been done for instance in the context of the covid pandemic there was some rethink on that okay that instead of three you can go up to five and you know the provisions were outlined and so on again conditionalities I mean the union government was behaving like as if it's the big brother and the you know like a landlord and so on but I would argue that for many states which are lower down the development ladder there is nothing wrong in saying okay you can choose to have this kind of arrangement so that you know your resource kitty can be strengthened right but that's a huge political decision whether that happens or not you know is difficult to say and one would be right in being pessimistic about it given the overall neoliberal climate etc. borrowing so you know you have to think of how to use your borrowed resources more judiciously there could be some improvements there in terms of prioritizing so whether it is your social sectors or basic infrastructure these could be pushed you know so for instance good quality education not only creates good quality education but it also creates huge employment right so you have a large number of young people train them properly and so on why is that not being prioritized okay so these things can be done then you have and I am being very careful when I propose this the option which had been foregone which was given up in 2016 and I am thinking of alcohol right what is this utterly shall I say retrogressive moralism which you want to impose on the state at large so can we think of taking care of that can we ask and this only we have cannot do as part of many other states insist on if you are not giving us anything else at least give us a share in says which is our right I mean why is it that this says becomes a right of the union government so these will have to be very important points of negotiation right and any progressive trajectory is to my mind almost impossible without some hard contestation some difficult choices so it would have to be a mixture of all that and that to be hard wouldn't be able to do it alone it has no no certainly not so but we have certainly can go back on its decision on prohibitions yeah and you know I talk talk to anyone from Bihar yeah and it has become possibly one of the biggest illegal industries in that state now do we want that right if you want to enforce it then that is a kind of expenditure which itself is extremely skewed kind of option no yeah instead of having teachers you want to have maybe five inspectors every village is that what we want to do so you know I think possibilities are there no easy options sure enough yeah I mean of course whatever slack is there in let us say resource utilization I am not talking of mobilization now that again can be used but yes if we can do some of these things I think it should be possible to move ahead but the larger challenges how to get a more progressive kind of federalism in place again yeah to my mind as I said earlier no this GST was anti-constitution and of course it has been adopted by all states now you can say that it has been passed how can you say this but the spirit of constitution I think this was completely against that you know very good arguments have been given why as per the constitution it was a disaster and as an economic arrangement there is nothing which can be claimed for it to my mind you know it's all rhetoric so if you want to be in the happy world of Alice in Wonderland so be it okay but possibilities are there they have to work much harder thank you thank you so much professor for the pleasure it was a pleasure talking to you that's all we have time for today keep watching news click